Vice President of the European Commission responsible for Competition Policy

Competition policy as a pan-European effort

European Competition Day/ Nicosia

2 October 2012

Ladies and Gentlemen,

It is good to be back in Nicosia to participate in the Competition Day.

I congratulate the Commission for the Protection of Competition for organising this event and I thank Ms Christodoulou for her kind invitation.

For me as Commissioner for Competition, and for the colleagues of the 27 National Competition authorities, this is one of the more relevant activities taking place during every EU Presidencies.

You put on the floor important topics: private enforcement, competition in the food sector, and the role of national authorities.

As to private enforcement, I believe that companies and individuals that are victims of antitrust infringements should have the effective right to seek redress before national courts.

We need to make sure that the interaction with public enforcement is optimal in the interest of all and this will be one goal of the legislative proposal on antitrust damages that I intend to present to the College in the coming months.

As to food and the retail sector, the enforcement of competition law in these areas has gained visibility – and rightly so – since the report published by the European Competition Network last May.

The report highlights the important role of National Competition Authorities when it comes to the enforcement of our common rules on issues that are extremely sensitive for the daily lives of our fellow citizens.

After the publication of the report we have created a Food Task Force within DG Competition. The team is looking at different aspects of the food supply chain, including at the retail level. Later today, Alexander Italianer will chair the panel devoted to this topic, which will certainly bring additional elements to this debate.

The day closes with a discussion about the cooperation among National Competition Authorities within the framework of the ECN. I will talk about the broader significance of their work later on.

However, given the economic, social and political context in which we celebrate this Competition Day, you will allow me to focus my presentation on some broader issues.

After over four years into this crisis, the twin imperatives to consolidate public budgets and solve the euro crisis for good are taking their toll on our economies and – above all – on the standards of living of our people.

The latest steps taken by the European institutions go in the right direction.

I very much hope that Europe’s leaders will keep their pledge to adopt a road-map to complete a banking union and advance towards a fully-fledged fiscal union by the end of the year, and to put forward a realistic plan for a genuine economic union.

The urgency to translate these plans into concrete agreements and actual policies is pretty obvious.

Let us see how things develop.

However, as competition enforcers, we cannot remain passive. We cannot be simple observers of what will be the outcome of the leaders' debates. We need to actively contribute to find solutions to the present difficulties.

In how many ways can competition policy help Europe overcome the recession, return to growth at a sustainable pace, and advance in its process of integration?

Our core responsibility – as authorities responsible for the enforcement of EU competition law – is to keep markets open and fair. This is well known.

But you will agree with me that our action has broader implications – and today I would like to explore some of them.

The first is that competition control helps Europe’s economy become more competitive. Competition authorities create better conditions for economic growth – and Europe needs them more than ever. I’ll come back to this point later with a few examples.

But before I do, I want to look at another side of competition-law enforcement. That is, the role of EU competition policy as a factor for political integration.

As a pillar of the Single Market, competition policy has always been intended as an instrument to build a united Europe.

Our action is crucial to the vision that our founding fathers had for a peaceful, prosperous and united continent.

I would say that we are among the most tangible expressions of that vision, because EU competition control is one of the very few policies that Member States have assigned entirely to common institutions: the Commission and the Court of Justice.

We carry on our shoulders – together with the National Competition Authorities – the responsibility to deliver an integrated and efficient Single Market to all Europeans.

And I think we all are fully honouring the responsibilities we have received from our legislators.

Competition policy as a factor of integration

Half a century after its establishment, EU competition policy has not lost its force as a factor of integration.

Let me recall that May 1st 2004 was both the day when ten new countries joined the Union and when a new system for the application of antitrust rules entered into force.

For the first time, national courts and competition authorities had the power and the duty to apply the same set of rules as the Commission whenever there was an effect on trade between Member States.

This was the result of Regulation 1/2003, which also established the European Competition Network.

The reform of 2004 was an important challenge for the national authorities, which had to build up their methods and expertise, especially in countries without an established tradition in competition-law.

The ECN has played a major role in this process. It has disseminated knowledge and best practices and it has promoted a culture of dialogue based on mutual trust and respect.

There is nothing like working together on practical matters to cement our Union. And the work we have done together has been quite extensive.

Between the establishment of the ECN and September 1st 2012, the authorities that are part of the network had informed each other of more than 1,500 antitrust investigations.

And these were only the cases with an effect on trade between Member States, which are a fraction of the cases national authorities have investigated exclusively under their national laws.

Let me give you an example of the spill-over effects of this large coordinated activity since 2004.

In addition to adapting their competition-control systems to the new standards, authorities in the new Member States have had to raise awareness in their business and legal communities.

This involves many people who must become familiar with key antitrust and enforcement tools, such as leniency programmes for instance.

We know that a well-designed leniency programme is an essential tool against cartels, and virtually all Member States have introduced them now.

But these programmes work well only if business people understand the need to play by the rules and the advantage of applying for leniency when they don’t.

This is why many authorities do advocacy and outreach work, and this is an important part of our task. I encourage you to continue along this path, because our efforts to build a common competition culture in Europe should not be limited to enforcers, lawyers and other specialists.

We should involve many more people including some of the most active and influential members in our societies. And this is a process that promotes integration in Europe well beyond markets.

Since 2004, there has been significant progress. The ECN has generated a dynamic process of cooperation and the EU antitrust rules have become the "law of the land". We should be proud of our achievements, and we should build on them to raise up to today's challenges.

These are difficult times and the calls for nationalist and protectionist policies grow louder by the day. We need to explain to our citizens that these policies have been proven wrong many years ago.

We need to explain that competitive markets are a better solution; that they are able to adjust more quickly to new economic conditions and therefore recover faster in the interest of all Europeans.

Competition policy for growth

Dear Colleagues, Ladies and Gentlemen:

I have just mentioned my second big theme for today; how competition policy can create better conditions for the economic recovery.

In the latest stages of the crisis, it has become clear that austerity measures are not enough. For our policies to succeed, we need Europe to take a sustainable growth path.

Of course, at the national level it is not possible to pursue policies of fiscal consolidation and, at the same time, use large amounts of public funds to fuel demand. But there are alternatives that cost very little or nothing at all.

One of them is tapping the growth potential of the Single Market to the full. If we pull our act together it won’t take too much money to complete it.

In fact, all it takes is leadership and political will. This is what we should ask of Europe’s governments rather than the futile attempts to defend their national turfs.

The Commission is doing its part. In the spring of 2011, we adopted the Single Market Act, with concrete and short-term deliverables in several areas of policy, including for energy and electronic communication networks.

Tomorrow the Commission will approve the second package of this plan with a greater emphasis on facilitating economic growth. The package includes ambitious proposals for the internal market on transport and confirms the importance of efficient and interconnected networks in Europe. Important steps are also planned for a European single payment area.

Finally, strong emphasis is put on the facilitation of cross-border investment and financing as well as on the simplification of the business environment.

Nothing can boost a sustainable growth pattern more than turning the Single Market into a reality for innovative entrepreneurs, efficient businesses, and 500 million consumers.

The work of the EU competition authority has two main effects in this context.

First, in the knowledge economy, a growing part of our enforcement involves industries where information is key, such as financial services, telecoms, and the digital economy – and these are crucial markets for growth. In doing so, we do not shy away from taking on corporations with a global reach.

Second, our investigations and decisions help Europe keep its edge over its global competitors by promoting competition across the whole Single Market.

Take for example our recent work on mergers in the telecoms sector. As you know, the sector is of great interest to us because we want to reduce the market fragmentation that still persists despite over fifteen years of liberalisation.

In most cases we have found solutions with the companies to maintain good competitive conditions in the market and allow them to proceed with their deals.

Consolidation at EU level can be beneficial when it increases efficiency; for example, a deal bringing together operators active in different countries and with limited or no overlaps in their networks could have that effect.

But we need to keep an eye on deals that would increase concentration in already concentrated markets.

For instance, we are currently looking into the attempt by Hutchison's Austrian telecoms unit to take over Orange Austria. This is a $1.6 billion deal which, if it goes through, would bring the current four competitors in the national mobile market down to three.

We have recently adopted a Statement of Objections in relation with this proposed merger. At this stage, the question remains whether effective remedies will be found.

We have a similar situation in another pending merger case; the proposed merger plans of UPS and TNT.

Here too, the deal would reduce from four to three the number of companies that control pan-European parcel-transport networks.

An important issue in our analysis is whether the company that resulted from the merger would be challenged enough by the other two competitors; DHL and FedEx.

These companies offer a service that has a broad impact on our economy, especially for cross-border trade, so it is important that customers continue to have access to these services at competitive conditions.

I will now turn to our work in new, fast-moving industries. Many of you are aware of our antitrust work concerning the alleged abuse of standard-essential patents in the so-called patent wars among smartphone manufacturers.

One goal of these cases is to make sure that the companies involved do not misuse their patents as weapons to harm legitimate competitors.

A good patent system that rewards invention and stimulates innovation is vital for growth and job creation. At the same time, a system that grants exclusive rights can be abused or distorted through anticompetitive agreements.

In addition to the high-tech sector, we are wary of other manipulations of property rights in the pharmaceutical sector too. We have recently issued formal objections in two cases involving patent settlements.

The main companies involved in the first cases are Servier and Lundbeck. Another pending case involves Cephalon and Teva, where we investigate a settlement that was concluded in the US but has worldwide implications.

In addition, we have the Fentanyl case pending against Johnson & Johnson and Novartis with regard to certain practices that could have also restricted competition.

I picked these recent cases because they show well how a robust and fair competition control can provide the extra boost that our economies need to regain dynamism, improve resilience, and encourage innovation.

State aid

Our action in mergers and antitrust is not the only means we have to keep the integrity of the internal market. As you know, we also have to make sure that certain government expenses do not distort competition in the Single Market.

We have been quite active in this domain. At the start of the year, a new framework for the Services of General Economic Interest came into force.

These services are activities that would not be produced by market forces alone or at least not in a form that would be available to all.

The SGEI reform will give us better tools to promote efficiency and quality in certain areas, such as energy, transport, telecommunications and postal services.

We reformed our rules with three main goals in mind: clarification, simplification, and a better focus on the services that receive large government funds and therefore are more liable to distort competition conditions in the Single Market.

In the wake of this reform, we are modernising the whole of our State aid policy. The drive of this exercise is consistent with that of the SGEI reform.

We want our control of State aid to support growth and the Europe 2020 objectives; to give priority to cases that have a significant impact on the internal market; and to streamline our decision-making.

Finally, let me mention the work we have been doing under the emergency State aid regime introduced since the end of 2008 to keep under control the massive public funds needed to rescue Europe’s banks.

We need to repair the financial sector and put it on more solid ground. We cannot expect to start a cycle of sustainable growth until banks go back to their core function of providing finance to the real economy.

Under these temporary State aid rules, European banks in distress can receive government support on condition that they restructure so that they won’t need it again in the future.

And when a bank cannot submit a realistic restructuring plan, it is our duty to make sure that it is orderly resolved.

In some cases – as in Ireland, Portugal and Greece – we’ve had to look into the restructuring of a country’s entire banking sector. We are embarking on important restructuring of those banks which needed to resort to State support, and – together with the Eurogroup, the ECB and the IMF – we are discussing how to use the resources of the respective Assistance Programs to finance the restructuring plans.

In Spain, last Friday's publication of independent stress-test results marks an important step towards the identification of final capital needs and recapitalisation of banks in distress under the condition set up in the Memorandum of Understanding adopted to focus especially on this sector.

In other Member States, we have often addressed old structural problems – as was the case with several German Landesbanken – or imprudent risky lending – as with several British, Dutch and Belgian banks.

Here, most of the restructuring has been agreed and the banks are implementing cost-cutting measures, divestments, and re-focussing on their core business. Some of the aid beneficiaries have started to pay back the support to their governments.

In all the cases, the beacon that guides us in this work is making sure that the public money is used to return banks to long-term viability and that in the medium term the taxpayers will be paid back without losses.

Ladies and Gentlemen:

I hope I have answered the question I started with. These are some of the ways in which competition policy can promote growth in Europe.

Our action can contribute to keep the business environment in Europe more efficient; it can effectively foster our process of integration; and it can give lower prices and a wider choice to consumers.

For that purpose, we must fight against business practices and certain government decisions that slow down the economy; harm competitiveness and innovation; and taint economic relations with an element of injustice.

In closing, I would like to thank once again Cyprus’ competition authority for organising this conference and I wish every success to all the national authorities of the EU.